On the heels of strong second-quarter wireless growth, Canada's telecom providers are ramping up back-to-school promotions, this time pushing cheaper Internet deals in a bid to lure customers away from competitors.
With Labour Day looming, new offers aimed at students highlight a months-long fight for Internet customers between Rogers Communications Inc. and BCE Inc. in the crucial Ontario market.
New wireless deals have also popped up as the carriers try to carry over momentum from a second quarter that saw BCE, Rogers and Telus Corp. add a total of almost 200,000 new contract customers, far more than analysts expected.
"While all the major players have now launched some early back-to-school deals, the marketing and promotions appear to be kicking off in earnest in Ontario," Barclays Capital analyst Phillip Huang said in a research report published Monday.
"Unlike the prior years, the marketing appears to be more focused on the fixed-line side," he added, referencing residential services where the companies' hopes for growth are pinned on high-speed Internet as cord-cutting cuts into television subscriptions.
Rogers is offering Ontario college or university students a range of discounted Internet plans, including a package with 125 gigabytes of data and download speeds of up to 30 megabits per second for $45 per month, down from the regular price of $68. BCE has responded by offering a couple of discounted Bell Fibe plans, starting with one that features unlimited data and download speeds of up to 25 Mbps for $50 for the first eight months, increasing to $85 per month after that.
BCE is investing heavily in upgrading its last-mile networks to fibre-optic cables and has been marketing the higher speeds it can offer in neighbourhoods where it has replaced its legacy copper wires. Due to its cable infrastructure, Toronto-based Rogers can increase its own speeds by making less costly technology upgrades and it has responded to BCE with marketing touting its own high speeds.
Now, in preparation for the school year, Rogers has launched new lower-end offers aimed at students and BCE has countered with a few discounted offers of its own.
"Rogers has been quite aggressive on the breadth of their student plans with discounts ranging from 33 per cent off the regular price on the low tier to a 23-per-cent discount on the high tier," Jiang Zhang, an analyst with Macquarie Capital Markets, said in an e-mail, noting that while BCE has responded, it has not yet launched as many offers as Rogers.
That would be in keeping with BCE's strategy – detailed when it announced its second-quarter financial results two weeks ago – of pulling back a bit from the marketing war to focus on maintaining higher-margin, profitable customers.
"In Ontario, wireline promotions between cable and telco competitors remain at the elevated levels we witnessed over the past few months," RBC Dominion Securities analyst Drew McReynolds said in a report Monday.
He added that while Calgary's Shaw Communications Inc. recently introduced an aggressive new low-priced Internet offer, "promotional intensity [in Western Canada] still does not appear to compare to Ontario."
On the wireless front, Rogers and Telus have both introduced new premium smartphone plan offers and Quebec's Videotron Inc. is also pushing plans with higher monthly data limits.
"Market activity is being driven by the typical combination of 'back-to-school' and the anticipation of a new iPhone launch, which drives promotional intensity on older handsets," Mr. McReynolds said.
"However, we also believe carriers are looking to maintain the postpaid subscriber momentum from [the second quarter] as the strong customer traffic trends in late June carried into [the third quarter]," he added.
None of the national carriers pointed to a specific reason for the increase in subscriber numbers in the second quarter but they noted that "customer traffic notably increased in June, which carried through into July," Mr. McReynolds said in an earlier report after the quarterly reporting season wrapped up.